Dave and Teri Andersen founded Sterling Woodcraft in 1994 with the goal of providing custom cabinetry in the form of kitchens, wall units, home offices and theaters, and architectural millwork for high end residential and commercial customers. “We grew very rapidly in the early years,” he says, “and went through two expensive moves in the first five years just to keep up with expanding business.” “We bought some pretty costly, state of the art equipment during this time so that we could continue to offer our customers the most advanced designs and best quality,” adds Teri, financial manager of the company. In order to pay for this growth and expansion, the Andersen’s relied heavily on debt financing.
Then, in 2000 and 2001, the DOT-COM bust hit Sterling Woodcraft hard. “Many of our projects were for CEO’s and CFO’s of DOT-COM companies,” Dave explains. “When the economy went bad, some projects were either scaled back or cancelled entirely and new projects were very scarce.” “And, we were left with large business debts to manage,” laments Teri.
In response, Dave and Teri tightened up on expenses, which, unfortunately, yielded only limited results. Dave felt that in order to continue to offer the advanced designs, quality product and quick project turnaround times that their high end customers demanded, Sterling Woodcraft needed to maintain its technical edge by purchasing additional state of the art equipment. On the other hand, Teri worried that the company’s debt and cash flow were too precarious. Dave and Teri decided that they needed help, so they contacted Silicon Valley SCORE and asked to participate in the Existing Business Assessment Program.
Two experienced SCORE counselors, Charlie Askanas and Mike O’Connor, began working with the Andersen’s in January 2006. “One of the first questions that Charlie and Mike asked was whether we were really taking advantage of Sterling Woodcraft’s value-added proposition in our project pricing,” says Dave. “With their guidance we reformulated how we price extras and options and increased our hourly rate by 13 percent,” comments Teri, “and, I’ve started submitting invoices in a timelier manner.” Charlie and Mike also advised Dave that he needed to tighten controls on the shop floor in order to increase productivity.
“I’m really a craftsman at heart,” says Dave, “and I need to focus my time on the sales and design side of the business. I started this business under capitalized and with no formal business training. Unfortunately, I’ve really gotten bogged down in managing all the internal details.” He continues, “Charlie and Mike are coaching me on how to delegate more so that I can free up time for sales and design activities.” The Andersen’s have improved Sterling Woodcraft’s website and are planning a new marketing brochure based on recommendations from their SCORE counselors.
Over the past year, based in part on these corrective actions and the advice and support of SCORE, Sterling Woodcraft’s revenues increased over 30 percent; cash flow from operations went from negative to positive; and, the Andersen’s were able to reduce business debt by almost 30 percent.
“I think we’re really on the right track for the next phase of growth,” comments Dave. “I’m looking forward to Charlie and Mike’s continuing guidance so that I can improve as a manager and be able to devote more of my time to the sales and design side of the business.” Teri adds,” We’re going to implement a more rigorous budgeting process and continue to monitor cash flow carefully. And, after we pay down the debt to a more manageable level, Dave may even be able to buy that next piece of equipment the he has been wanting.”